An oil symphony in three

Monday, May 25, 2015Sam Cage

Maersk Oil has three projects in the North Sea that can provide resilience in volatile markets, all requiring hefty investments but offering valuable long-term rewards. Johan Sverdrup is one of Norway’s largest discoveries, Culzean could supply 5% of the UK’s gas needs, and the Tyra Southeast expansion shows the value that can still be found in mature fields.

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The challenge in Culzean is the temperatures of up to 175°C and high pressure that is equivalent to being 9 kilometres underwater. Photo: Statoil

Johan Sverdrup

The Johan Sverdrup oil field is situated about 140 kilometres west of Stavanger and first production is expected in late 2019. Partners are Statoil (40.0267%), the operator, Lundin Norway (22.12%), Petoro (17.84%), Det norske oljeselskap (11.8933%) and Maersk Oil (8.12%).

The full field has a forecast plateau production of 550,000 to 650,000 boepd, which will contribute about 25% of Norwegian oil production in 2025. Maersk Oil’s share is expected to be about 50,000 boepd.

The first phase consists of four bridge-linked platforms and three subsea water injection templates, and has a production capacity of 315,000-380,000 boepd with total expected recoverable reserves of 1.4-2.3 billion barrels.

Capital expenditure is estimated at NOK 170-220 billion (2015 value) for the full field development.

The Johan Sverdrup field lies in the area of the first ever exploration licence awarded in Norway, yet it evaded discovery until 2010.

It needed a wider view of the area, and it was only when explorers from Lundin Petroleum – one of Maersk Oil’s partners in the field – zoomed out to look at the bigger picture that the discovery and its extent became clear.

The field is now one of three major Maersk Oil projects due to come on stream in the North Sea in the next five years, which can give its portfolio added resilience against oil price volatility.

While Johan Sverdrup provides low-cost barrels, Culzean adds gas production with a different price dynamic and Tyra Southeast shows the value to be gained by exploiting already existing assets.
Long-term view
Johan Sverdrup remained undiscovered for so long because it is situated almost 40 kilometres from the “kitchen” where the oil was formed, and from which it is separated by the solid granite of the Utsira High. The oil had either to take the long journey around the ridge, or found a shortcut through it – both routes are extraordinarily challenging journeys for oil to migrate.

Keeping it simple is key to handling Culzean’s extreme conditions.

PROJECT MANAGER MARTIN URQUHART

Today, Johan Sverdrup is one of Norway’s largest-ever discoveries, with first oil planned for late 2019 and recoverable resources estimated at between 1.7 and 3.0 billion barrels of oil equivalent (boe).

“Its big advantage is that there is lots of oil and a world class reservoir located in a mature part of the North Sea, with no major technical challenges. The big challenge is the sheer size of the project and how to deliver it safely, within budget and on time,” Seger says.

Maersk Oil and its partners – Statoil the operator, Lundin, Petoro and Det norske oljeselskap – have submitted a development and operation plan for the first part of Johan Sverdrup’s development. Statoil has estimated that profitable extraction from Johan Sverdrup requires an oil price of around $40 per barrel.

Effective cost control and tight project execution discipline are important elements of dealing with a lower oil price environment. Focusing on development projects like Johan Sverdrup, which have a solid investment case, can add more resilience to the portfolio in the mid- to long-term, says Chief Operating Officer Gretchen Watkins.

“The opportunities are still there in a mature basin like the North Sea,” Watkins says. “But you have to take a long-term view. These kinds of projects need a big upfront investment, but if you do the proper planning upfront then you can reap the rewards.”
Balancing the portfolio
Some 240 kilometres offshore Aberdeen, the Culzean field will add something different to the Maersk Oil portfolio – a high pressure, high temperature field predominantly producing natural gas. It is estimated that Culzean will produce about 5% of the UK’s domestic gas needs at its plateau and it is awaiting a final investment decision later this year.

If you plan well, there are rewards to be found in the mature basins like the North Sea.v

GRETCHEN WATKINS, MAERSK OIL COO

Culzean

Culzean is an ultra-high pressure, high temperature (uHPHT) field. Maersk Oil UK (49.99%) is the operator and JX Nippon (34.01%) and Britoil (BP) (16%) are partners.

Its forecast plateau production is 400-500 million standard cubic feet per day, giving Maersk Oil equity production of 30,000-45,000 boepd.

It benefits from an extended uHPHT allowance, which exempts a portion of a company’s profits from the supplementary charge, or top-up tax paid by the North Sea industry

The challenge in Culzean is the temperatures of up to 175°C and high pressure that is equivalent to being 9 kilometres underwater. This makes the project more capital intensive with total investment expected to land at more than £3 billion, of which Maersk Oil’s share is about half. This project will benefit from the UK government’s ultra-high pressure, high temperature (uHPHT) tax allowance.

“The project requires equipment that can handle the extreme conditions,” says project manager Martin Urquhart. “We’re using the principle of keeping it simple and using proven technology to ensure we maintain the highest safety standards, while keeping costs low.”
Profitable production
Involving the construction of a new unmanned platform, the Tyra Southeast expansion is a different type of project which takes advantage of assets that are already in place by tapping a new part of an existing field. This is a cost efficient way of adding barrels to Maersk Oil‘s portfolio.

The Tyra Southeast expansion

The new unmanned, Tyra Southeast-B, platform installed this year is a satellite of the existing Tyra Southeast platform. It is operated remotely from the manned Tyra platforms, and visited by technicians on a regular basis.

Maersk Oil and its partners are investing DKK 4.5 billion in the project, which is expected to add reserves of 50 million boe with peak production in 2017 of 20,000 boepd.

The Tyra field is operated by Maersk Oil on behalf of the Danish Underground Consortium (DUC). DUC is a partnership between A.P. Møller – Mærsk A/S (31.2%), Shell (36.8%), Nordsøfonden (20%) and Chevron (12.0%).

A new unmanned platform has been installed and is run remotely from an existing platform, with technicians visiting on a regular basis. The development shows how Maersk Oil can extract value from the Danish North Sea by combining its knowledge and experience with long-term planning and the right technical capabilities.

“These are the kind of developments that help us add profitable production and maximise the value of our existing infrastructure for the benefit of Maersk Oil and Denmark,” Watkins says.

“It all started in the North Sea, and it still remains an integral part of our future.”

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